Question

ABC Co. shows the following information on its 2014 income statement: sales = $178303; costs $87566; other expenses-$4909; depreciation expense = $11511; interest expense $7180; taxes $19805; dividends-$9815. In addition, you're told that the firm issued $2839 in new equity during 2014, and redeemed $4114 in outstanding long-term debt. If net fixed assets increased by $18703 during the year, what was the addition to NWC (in $)?

Answer 1

Cash flow from assets = Cash flow to stockholder + cash flow to liabilities

= [Dividend – net new equity issued]+[Interest – net new debt issued]

                                           = [9,815 – 2839] + [7180 -(-4114)]

                                            = 6,976 +11,294

                                            = $18,270

Operating cash flow = Sales –Cost of goods sold – other expenses – Taxes

                                        = $178,303– 87,566 - $4,909 - $19,805

                                       = $66,023

Addition to NWC = Operating cash flow – Cash flow from assets – Capital expenditure

                                   = $66,023 - $18,270 – [18703+11511]

                                   = $17,539.

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